Musicians Trade Waiver of Royalty Rights in Exchange for Exposure – Maybe Not Such a Bad Idea

Should artists waive their rights to performance royalties in order to get airplay on broadcast or Internet radio stations? That questions has come to the fore based on a click-through agreement that Clear Channel included on a website set up to allow independent bands to upload their music for consideration for airplay by its stations. While artist groups, including the Future of Music Coalition, condemned that action, there are always two sides to the story, as was made clear in a segment broadcast on NPR’s Morning Edition, in which I offered some comments. As set forth in that segment, artists may be perfectly willing to allow unrestricted use of a song or two in order to secure the promotional value that may result from the airplay that might be received. For the broadcaster or Internet site seeking such permission, getting all rights upfront may well be an important consideration in deciding whether or not to feature a song – especially in the digital media.

Critics of the waiver made much of the fact that the site was set up at least partially to meet Clear Channel’s informal commitment made as part of the FCC payola settlement to feature more independent music, even though that commitment was not a formal part of the settlement agreement. (See our summary of the payola settlement, here). Even to the extent that the informal commitments made by the big broadcasters encompassed making time available to more independent musicians, the critics ignore the fact that the companies do not need any waiver of any sound recording performance royalty in connection with the over-the-air broadcast of those songs, as there currently is no public performance right in a sound recording for over the air broadcasting (though artists and record lables are now pushing for such a royalty, see our story here). Thus, the use of the waiver was only for the digital world – which was not covered by the FCC’s jurisdiction over payola promises or the promises to increase the use of independent music. So, effectively, the company is being chastised for trying to minimize their costs on giving the music even greater circulation through their digital platforms than they initially promised.

And even in the digital world, the releases gives the company the opportunity to provide even more exposure to music through services that the existing compulsory royalty for Internet radio doesn’t cover. For instance, the current royalties do not allow digital sites to feature any of that music in any sort of podcast or interactive service without specific permission from the artist. Would a big broadcaster want to go through the extra trouble of securing such rights for a few plays on an interactive service or for inclusion of such music in a podcast? Probably not for a new, unknown act. When looking to expose new bands or those with limited exposure, it would seem that a waiver of whatever limited royalty an independent artist would receive from the statutory royalty (at the rate of approximately one-tenth of a penny per play, less the artist’s share of SoundExchange’s operating costs) would be a good deal in exchange for the possibility that the Company would feature the song on multiple digital platforms.

It would seem to me that the problem here was not the concept of a waiver of rights, but perhaps was due more to the execution through the click-through license. With all of the focus recently put on music rights by the Interent radio royalty controversy and other recent proceedings, more artists are becoming familiar with their rights and many would generally understand the language of that agreement. Maybe the fact that the waiver was "discovered" by artist groups led to their surprise, and surprise often leads to the public outcry. But, when you look at the details of the controversy, there may be less fire than smoke in this case.

About David Oxenford

David Oxenford represents broadcasting and digital media companies in connection with
regulatory, transactional and intellectual property issues. He has represented broadcasters before the Federal Communications Commission, the courts and other government agencies for over 30 years. Continue Reading

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David is a partner at the law firm of Wilkinson Barker Knauer LLP, practicing out of its Washington, DC office. He has represented broadcasters for over 30 years on a wide array of matters from the negotiation and structuring of station purchase and sale agreements to regulatory matters. His regulatory expertise includes all areas of broadcast law including the FCC’s multiple ownership limitations, the political broadcasting rules, EEO policy, advertising issues, and other programming matters and FCC technical rules.